This month we focus on the imminent VAT changes following end of the UK’s transitional period on 31 December 2020 and, our exit from the EU VAT and Customs Union on 1 January 2021. We also comment on another fixed establishment case that is proceeding to the European Court. This is an area that is becoming increasingly complex.
Intrastat requirements from 2021
The government has published guidance on intrastat reporting requirements from 2021. The guidance makes it clear the following will still need to be reported from next year:
- Goods imported into Great Britain (GB) from the European Union (EU);
- Goods imported into Northern Ireland from the EU; and
- Goods exported from Northern Ireland to the EU.
Reporting requirements in relation to Northern Ireland imports and exports will continue for at least four years, whilst the requirement to report imports from the EU for the rest of the UK will only apply for the 2021 calendar year. The need to report movement of goods from the UK to the EU, other than from Northern Ireland to the EU, is being removed altogether. There will, therefore, be no ‘dispatches’ supplementary declarations required from 1 January 2021.
Comment: We recently highlighted the revised intrastrat reporting requirements for next year, and noted the arrivals thresholds remain the same (£1.5 million for EU imports). It remains to be seen whether new reporting will be required after 2021 for trade with the EU. No comment has been made by HM Revenue & Customs (HMRC) HMRC at this point to indicate whether some sort of EC sales list will be required – currently this is not expected to be the case.
If you are currently required to file intrastat returns and/or EC sales lists please speak to your usual Saffery Champness contact for further information.
E-commerce changes 1 July 2021
Changes in the EU VAT system have been ongoing for several years as part of an overhaul designed to make the application of certain regulations a little easier for taxpayers to implement and to reduce the compliance burden. The changes to the e-commerce sector are the next phase of the overhaul and they were originally scheduled to be introduced on 1 January 2021. Covid-19 related matters have seen the introduction pushed back to 1 July 2021.
The changes see the introduction of:
- A new ‘one-stop shop’ (OSS) which replaces the existing mini one-stop shop (MOSS) through which businesses can report B2C supplies of BTE and distance selling.
- An import one-stop shop (IOSS) which enable non-EU established businesses to pay import VAT on low value imports in the EU.
- A new deemed supply by ‘electronic interfaces’.
- The further extension to the OSS simplification to include many types of service supplied on a B2C basis.
Comment: What is happening within the EU VAT system is still very relevant for UK businesses that have existing EU supply chains and customers. Not only will changes that arise as a direct result of the UK leaving the EU single market from 31 December 2020 need to be considered and prepared for, the changes from 1 July 2021 may be equally significant and should not be underestimated or overlooked.
To help clients navigate through the e-commerce VAT changes we have produced as series of FAQs which are available here.
Please contact Nick Hart or your usual Saffery Champness partner for further assistance and guidance.
The UK import/export operating model
Earlier this month, the UK government published the latest iteration of its post-Brexit operating model in respect of imports and exports. The publication, entitled ‘The Border with the European Union – Importing and Exporting Goods’, outlines in detail the model which all importers and exporters would need to follow from 1 January 2021 onwards, when the UK has left the EU Customs Union and Single Market.
The publication is an extensive document and the updated version contains information of new elements and some changes to existing ones. Key changes are:
- Further detail on delayed customs declarations;
- Updates in a number of agrifood and environmental policy areas (including fish and plant products); and
- Further details on liabilities for intermediaries.
The document also provides a useful summary and timeline on what will be required for 1 January 2021 and other key milestone dates throughout 2021.
It is important to note that an initial 12-month period of 0% Customs Duty, which was to be implemented in the case of previous no-deal Brexit scenarios, is not part of the current plans for the post-transitional period, and Customs Duties based on the new UK Global Tariff are likely to be due.
Comment: Whilst, at the time of writing, there is still the possibility a UK/EU trade deal will be struck, which would likely require further revisions to the Operating Model, businesses should plan for a no-deal end to the transition period.
The initial six-months from 1 January 2021 will see delayed customs declarations. From July onwards, that easement will expire and customs declarations will be required when goods arrive in the UK. In preparation for the immediate new measures and those from 1 July 2021, businesses are strongly advised to plan now and engage with a customs agent where applicable, to assist with bringing goods into the UK from the EU next year.
You can read more in our articles:
- Brexit and VAT: the end of the transitional period (for goods).
- Brexit and VAT: the end of the transitional period (for services).
- Brexit and VAT: the impact on international trade.
The operating model document can be viewed here.
Fixed establishment topic evolves further
Another referral has been made to the Court of Justice of the European Union (CJEU) regarding the concept of fixed establishment (BCAM [C-333/20]).
BC, a German company, sells goods in Romania where it has a non-resident VAT registration. BCAM, incorporated in Romania, provides BC with marketing, advertising and regulatory support services, has treated those services as being outside the scope of Romanian VAT, and subject to reverse charge VAT in Germany. The Romanian tax authorities believe, by virtue of its own subsidiary, BC has sufficient human and technical resources at its disposal in Romania to create a fixed establishment there. This would mean BCAM’s services to BC are subject to VAT.
The concept of business establishment and fixed establishment is relevant to place of supply questions regarding the provision of services and, whilst branch structures create fixed establishments, the question of whether a subsidiary of a company can create a fixed establishment for a parent company, or other legal entity within the group continues to be the subject of disputes.
Comment: Our May 2020 VAT update looked at the CJEU decision in Dong Yong [C‑547/18], where the court ruled that that the existence of an EU fixed establishment of a subsidiary of a parent company that is located outside the EU does not infer that parent company also has an EU fixed establishment. The BCAM referral asks a slightly different question in that all elements are within the EU, BCAM seems to be operating under the control of BC, and BCAM performs its activities entirely for BC. This model is not uncommon in international corporate business structures, and should the CJEU rule that BCAM is creating a fixed establishment of BC in Romania, the judgement could have far reaching consequences across the EU. We await the decision of the CJEU in this case, with interest.